The Fertilizer Institute (TFI) praised the Surface Transportation Board (STB) for its work to modernize revenue adequacy procedures and standards to better reflect the current landscape of the rail marketplace. TFI delivered this message at an STB public hearing, held to further examine issues raised in Railroad Revenue Adequacy (Docket No. EP 722). In delivering its testimony, TFI served as the voice of the fertilizer industry for the Concerned Shippers Associations, a group representing shipper industries with common rail policy interests.
"Today's hearing at the STB reflects Congressional and agency interest in updating oversight of the rail marketplace," said TFI President Chris Jahn. "In 1986, there were 23 Class I rail carriers in the United States. Today, there are seven Class I rail carriers of which four control over 90 percent of the U.S. market. TFI thanks the Surface Transportation Board (STB) for its efforts to modernize revenue adequacy standards, which under current practice, make no sense in today's marketplace."
The STB's current rate review standards were put in place more than three decades ago when the railroad industry faced severe financial hardships and no railroad was considered "revenue adequate." Since that time, the STB has relied solely on its Stand-Alone Cost (SAC) standard, which allows a railroad to charge its captive shippers rates that are higher, even many times higher, than the rates charged to shippers with competitive transportation options.
The STB's rate review procedures are increasingly unworkable. To successfully challenge a rate under the SAC standard, a shipper must prove that it could build and operate its own railroad for less than what the railroad currently charges. The STB estimates that a SAC standard challenge takes more than three and a half years and costs a shipper $5 million plus the higher tariff rates that it must pay while the case is pending.